As we already know, electricity in Spain only goes up every year. Spain, along with Portugal, are the countries with the most expensive electricity in all of Europe. But what is the reason for this? There are multiple reasons behind this increase, such as the lack of rain, the low wind energy generated and the scarce implementation of photovoltaic energy. These factors force the thermal power plants to work at maximum capacity, which inevitably increases the price of electricity.
In this article, we will take a closer look at the reasons behind this phenomenon and how Spain compares to the rest of Europe in terms of electricity prices.
Electricity prices in Spain vs Europe
Over the past few years, the price of electricity in Spain has experienced a constant increase. At one point in June, the price of electricity in Spain reached 1000 euros. 50,25 euros per MWh, while in Portugal it was similar. This figure contrasts significantly with markets such as France and Germany, where the price of electricity amounts to 32,7 euros per MWh and 30 euros per MWhrespectively.
The reasons for these differences are multiple and complex. Firstly, Spain is highly dependent on weather conditions. When there is a shortage of wind and rain – which negatively affects the production of wind and hydroelectric energy – thermal power plants must activate more of their production to compensate, which increases costs.
On a comparative level, some European countries such as Ireland and Germany They also face high electricity prices, mainly due to the transition to clean energy and the progressive disconnection from more polluting energy sources, such as coal.
In this process, CO2 emission rights also play a significant role. Power plants that use gas and coal have to pay high prices for carbon emissions, which further increases costs and ultimately falls on the end consumer.
Factors that influence the price of electricity in Spain
Beyond weather conditions, other factors contributing to the high price of electricity in Spain are related to energy policies and taxes.
- Taxation: In Spain, consumers bear a 21% VAT on electricity, one of the highest in Europe. Although this percentage was temporarily reduced to 10% in mid-2021 to ease the economic impact on households, it is still higher than countries such as Ireland (13%) or Italy (10%).
- Gas dependence: The dependence on combined cycle gas plants, which use gas to generate electricity, is another important factor. Despite the so-called "Iberian exception", which limits the cost of gas and regulates the wholesale price of electricity, Spain still has to pay high prices for it on international markets.
- Wholesale market: In the Spanish energy market, all technologies (both renewable and non-renewable) set their prices in the same system, the daily market or "pool". This means that when more expensive technologies, such as gas, set the marginal price, the costs for the final consumer rise, even if part of the energy comes from cheaper sources such as solar or wind.
The impact of renewable energy on prices
Renewable energy plays a key role in lowering electricity prices. In Spain, solar and wind energy already have a considerable presence in the energy matrix, but their production is still irregular due to climatic conditions. Sector specialists agree that a substantial increase in investment in renewables would stabilise prices downwards in a more sustained manner. In addition, it would reduce dependence on more expensive and polluting sources such as gas and coal.
For some, the long-term solution is clear: opt for an energy mix that relies more heavily on renewable energy. renewable energyIt is expected that by increasing the use of photovoltaic and wind energy, electricity prices in Spain may become more competitive in the coming years.
Likewise, countries that lead in investments and development of renewable energies, such as Denmark and Germany, show that, in the long term, this is the most appropriate way to keep electricity prices under control.
Global causes of price increases
The increase in electricity prices does not only affect Spain; this phenomenon is global in nature and is influenced by several factors. One of the main ones is the increase in the price of natural gas on international markets. Geopolitical conflicts, such as the conflict between Russia and Ukraine, directly affect the global supply of gas, which is used in combined cycle power plants for electricity generation.
The cost of CO2 emission rights has also had a major impact. Thermal and gas-fired power stations are required to buy emission rights for every tonne of CO2 they emit, and in recent years the price of these rights has risen sharply, resulting in a significant increase in the cost of electricity generation.
In summary, Spain continues to struggle with various factors that drive up the price of electricity compared to other European countries. However, as the share of renewables grows and energy policies evolve, Spanish consumers may see a reduction in their bills in the long term.